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Share Name | Share Symbol | Market | Type |
---|---|---|---|
CenturyLink Inc | NYSE:CTL | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 11.00 | 0 | 01:00:00 |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Louisiana
(State or other jurisdiction of
incorporation or organization)
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72-0651161
(I.R.S. Employer
Identification No.)
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100 CenturyLink Drive,
Monroe, Louisiana
(Address of principal executive offices)
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71203
(Zip Code)
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
o
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* All references to "Notes" in this quarterly report refer to these Notes to Consolidated Financial Statements.
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•
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the effects of competition from a wide variety of competitive providers, including decreased demand for our traditional wireline service offerings and increased pricing pressures;
|
•
|
the effects of new, emerging or competing technologies, including those that could make our products less desirable or obsolete;
|
•
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the effects of ongoing changes in the regulation of the communications industry, including the outcome of regulatory or judicial proceedings relating to intercarrier compensation, interconnection obligations, universal service, broadband deployment, data protection and net neutrality;
|
•
|
our ability to timely realize the anticipated benefits of our recently-completed combination with Level 3, including our ability to attain anticipated cost savings, to use Level 3's net operating loss carryforwards in the amounts projected, to retain key personnel and to avoid unanticipated integration disruptions;
|
•
|
our ability to safeguard our network, and to avoid the adverse impact on our business from possible security breaches, service outages, system failures, equipment breakage, or similar events impacting our network or the availability and quality of our services;
|
•
|
our ability to effectively adjust to changes in the communications industry, and changes in the composition of our markets and product mix;
|
•
|
possible changes in the demand for our products and services, including our ability to effectively respond to increased demand for high-speed broadband service;
|
•
|
our ability to successfully maintain the quality and profitability of our existing product and service offerings, to provision them successfully to our customers and to introduce profitable new offerings on a timely and cost-effective basis;
|
•
|
our ability to generate cash flows sufficient to fund our financial commitments and objectives, including our capital expenditures, operating costs, debt repayments, dividends, pension contributions and other benefits payments;
|
•
|
changes in our operating plans, corporate strategies, dividend payment plans or other capital allocation plans, whether based upon changes in our cash flows, cash requirements, financial performance, financial position, market conditions or otherwise;
|
•
|
our ability to effectively retain and hire key personnel and to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages;
|
•
|
increases in the costs of our pension, health, post-employment or other benefits, including those caused by changes in markets, interest rates, mortality rates, demographics or regulations, which may in turn impact our business and liquidity;
|
•
|
adverse changes in our access to credit markets on favorable terms, whether caused by changes in our financial position, lower debt credit ratings, unstable markets or otherwise;
|
•
|
our ability to meet the terms and conditions of our debt obligations;
|
•
|
our ability to maintain favorable relations with our key business partners, suppliers, vendors, landlords and financial institutions;
|
•
|
our ability to effectively manage our network buildout project and our other expansion opportunities;
|
•
|
our ability to collect our receivables from financially troubled customers;
|
•
|
any adverse developments in legal or regulatory proceedings involving us;
|
•
|
changes in tax, communications, pension, healthcare or other laws or regulations, in governmental support programs, or in general government funding levels;
|
•
|
the effects of changes in accounting policies or practices, including changes that could potentially require future impairment charges;
|
•
|
the effects of adverse weather, terrorism or other natural or man-made disasters;
|
•
|
the effects of more general factors such as changes in interest rates, in exchange rates, in operating costs, in public policy, or in general market, labor, economic or geo-political conditions; and
|
•
|
other risks identified in our "Risk Factors" disclosures included in our annual report on Form 10-K for the year ended December 31, 2017.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||
|
(Dollars in millions, except per share amounts
and shares in thousands)
|
|||||||||||
OPERATING REVENUES
|
$
|
5,818
|
|
|
4,034
|
|
|
17,665
|
|
|
12,333
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|||||
Cost of services and products (exclusive of depreciation and amortization)
|
2,672
|
|
|
1,927
|
|
|
8,205
|
|
|
5,705
|
|
|
Selling, general and administrative
|
967
|
|
|
710
|
|
|
3,191
|
|
|
2,404
|
|
|
Depreciation and amortization
|
1,285
|
|
|
910
|
|
|
3,858
|
|
|
2,739
|
|
|
Total operating expenses
|
4,924
|
|
|
3,547
|
|
|
15,254
|
|
|
10,848
|
|
|
OPERATING INCOME
|
894
|
|
|
487
|
|
|
2,411
|
|
|
1,485
|
|
|
OTHER (EXPENSE) INCOME
|
|
|
|
|
|
|
|
|||||
Interest expense
|
(557
|
)
|
|
(362
|
)
|
|
(1,638
|
)
|
|
(1,000
|
)
|
|
Net loss on early retirement of debt
|
(33
|
)
|
|
—
|
|
|
(34
|
)
|
|
(5
|
)
|
|
Other income, net
|
25
|
|
|
14
|
|
|
63
|
|
|
6
|
|
|
Total other expense, net
|
(565
|
)
|
|
(348
|
)
|
|
(1,609
|
)
|
|
(999
|
)
|
|
INCOME BEFORE INCOME TAX EXPENSE
|
329
|
|
|
139
|
|
|
802
|
|
|
486
|
|
|
Income tax expense
|
57
|
|
|
47
|
|
|
123
|
|
|
214
|
|
|
NET INCOME
|
$
|
272
|
|
|
92
|
|
|
679
|
|
|
272
|
|
BASIC AND DILUTED EARNINGS PER COMMON SHARE
|
|
|
|
|
|
|
|
|||||
BASIC
|
$
|
0.25
|
|
|
0.17
|
|
|
0.64
|
|
|
0.50
|
|
DILUTED
|
$
|
0.25
|
|
|
0.17
|
|
|
0.63
|
|
|
0.50
|
|
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|||||
BASIC
|
1,066,904
|
|
|
541,521
|
|
|
1,065,410
|
|
|
541,113
|
|
|
DILUTED
|
1,072,351
|
|
|
541,963
|
|
|
1,069,726
|
|
|
541,879
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||
|
(Dollars in millions)
|
|||||||||||
NET INCOME
|
$
|
272
|
|
|
92
|
|
|
679
|
|
|
272
|
|
OTHER COMPREHENSIVE INCOME (LOSS):
|
|
|
|
|
|
|
|
|||||
Items related to employee benefit plans:
|
|
|
|
|
|
|
|
|||||
Change in net actuarial loss, net of $(11), $(15), $(33) and $(57) tax
|
34
|
|
|
36
|
|
|
102
|
|
|
97
|
|
|
Change in net prior service costs, net of $—, $(1), $(2) and $(3) tax
|
3
|
|
|
2
|
|
|
7
|
|
|
6
|
|
|
Foreign currency translation adjustment and other, net of $(1), $—, $29 and $— tax
|
(1
|
)
|
|
18
|
|
|
(161
|
)
|
|
20
|
|
|
Other comprehensive income (loss)
|
36
|
|
|
56
|
|
|
(52
|
)
|
|
123
|
|
|
COMPREHENSIVE INCOME
|
$
|
308
|
|
|
148
|
|
|
627
|
|
|
395
|
|
|
September 30, 2018 (Unaudited)
|
|
December 31, 2017
|
|||
|
(Dollars in millions
and shares in thousands)
|
|||||
ASSETS
|
|
|
|
|||
CURRENT ASSETS
|
|
|
|
|||
Cash and cash equivalents
|
$
|
390
|
|
|
551
|
|
Restricted cash and securities
|
3
|
|
|
5
|
|
|
Accounts receivable, less allowance of $153 and $164
|
2,465
|
|
|
2,557
|
|
|
Assets held for sale
|
19
|
|
|
140
|
|
|
Other
|
1,237
|
|
|
941
|
|
|
Total current assets
|
4,114
|
|
|
4,194
|
|
|
Property, plant and equipment, net of accumulated depreciation of $26,493 and $24,352
|
26,168
|
|
|
26,852
|
|
|
GOODWILL AND OTHER ASSETS
|
|
|
|
|||
Goodwill
|
30,770
|
|
|
30,475
|
|
|
Restricted cash and securities
|
27
|
|
|
31
|
|
|
Customer relationships, net
|
9,309
|
|
|
10,876
|
|
|
Other intangibles, net
|
1,857
|
|
|
1,897
|
|
|
Other, net
|
1,126
|
|
|
1,286
|
|
|
Total goodwill and other assets
|
43,089
|
|
|
44,565
|
|
|
TOTAL ASSETS
|
$
|
73,371
|
|
|
75,611
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|||
CURRENT LIABILITIES
|
|
|
|
|||
Current maturities of long-term debt
|
$
|
778
|
|
|
443
|
|
Accounts payable
|
1,387
|
|
|
1,555
|
|
|
Accrued expenses and other liabilities
|
|
|
|
|||
Salaries and benefits
|
993
|
|
|
890
|
|
|
Income and other taxes
|
409
|
|
|
370
|
|
|
Interest
|
362
|
|
|
363
|
|
|
Other
|
374
|
|
|
344
|
|
|
Current portion of deferred revenue
|
983
|
|
|
892
|
|
|
Total current liabilities
|
5,286
|
|
|
4,857
|
|
|
LONG-TERM DEBT
|
35,749
|
|
|
37,283
|
|
|
DEFERRED CREDITS AND OTHER LIABILITIES
|
|
|
|
|||
Deferred income taxes, net
|
2,502
|
|
|
2,413
|
|
|
Benefit plan obligations, net
|
4,392
|
|
|
5,178
|
|
|
Other
|
2,639
|
|
|
2,389
|
|
|
Total deferred credits and other liabilities
|
9,533
|
|
|
9,980
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 12)
|
|
|
|
|||
STOCKHOLDERS' EQUITY
|
|
|
|
|||
Preferred stock—non-redeemable, $25 par value, authorized 2,000 and 2,000 shares, issued and outstanding 7 and 7 shares
|
—
|
|
|
—
|
|
|
Common stock, $1.00 par value, authorized 1,600,000 and 1,600,000 shares, issued and outstanding 1,080,573 and 1,069,169 shares
|
1,081
|
|
|
1,069
|
|
|
Additional paid-in capital
|
23,399
|
|
|
23,314
|
|
|
Accumulated other comprehensive loss
|
(2,454
|
)
|
|
(1,995
|
)
|
|
Retained earnings
|
777
|
|
|
1,103
|
|
|
Total stockholders' equity
|
22,803
|
|
|
23,491
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
73,371
|
|
|
75,611
|
|
|
Nine Months Ended September 30,
|
|||||
|
2018
|
|
2017
|
|||
|
(Dollars in millions)
|
|||||
OPERATING ACTIVITIES
|
|
|
|
|||
Net income
|
$
|
679
|
|
|
272
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|||
Depreciation and amortization
|
3,858
|
|
|
2,739
|
|
|
Deferred income taxes
|
486
|
|
|
(243
|
)
|
|
Loss on the sale of data centers and colocation business
|
—
|
|
|
82
|
|
|
Impairment of assets
|
46
|
|
|
11
|
|
|
Provision for uncollectible accounts
|
119
|
|
|
127
|
|
|
Net loss on early retirement of debt
|
30
|
|
|
5
|
|
|
Share-based compensation
|
144
|
|
|
64
|
|
|
Changes in current assets and liabilities:
|
|
|
|
|||
Accounts receivable
|
(8
|
)
|
|
2
|
|
|
Accounts payable
|
(151
|
)
|
|
(93
|
)
|
|
Accrued income and other taxes
|
217
|
|
|
103
|
|
|
Other current assets and liabilities, net
|
(42
|
)
|
|
(221
|
)
|
|
Retirement benefits
|
(639
|
)
|
|
(181
|
)
|
|
Changes in other noncurrent assets and liabilities, net
|
324
|
|
|
(54
|
)
|
|
Other, net
|
(27
|
)
|
|
87
|
|
|
Net cash provided by operating activities
|
5,036
|
|
|
2,700
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|||
Capital expenditures
|
(2,260
|
)
|
|
(2,363
|
)
|
|
Proceeds from the sale of data centers and colocation business, less cash sold
|
—
|
|
|
1,467
|
|
|
Proceeds from sale of property, plant and equipment and other assets
|
125
|
|
|
51
|
|
|
Other investing, net
|
(61
|
)
|
|
(5
|
)
|
|
Net cash used in investing activities
|
(2,196
|
)
|
|
(850
|
)
|
|
FINANCING ACTIVITIES
|
|
|
|
|||
Net proceeds from issuance of long-term debt
|
130
|
|
|
6,608
|
|
|
Proceeds from financing obligation
|
—
|
|
|
356
|
|
|
Payments of long-term debt
|
(1,539
|
)
|
|
(1,612
|
)
|
|
Net borrowings (payments) on revolving line of credit
|
185
|
|
|
(370
|
)
|
|
Dividends paid
|
(1,735
|
)
|
|
(881
|
)
|
|
Other financing, net
|
(48
|
)
|
|
(11
|
)
|
|
Net cash (used in) provided by financing activities
|
(3,007
|
)
|
|
4,090
|
|
|
Net (decrease) increase in cash, cash equivalents, restricted cash and securities
|
(167
|
)
|
|
5,940
|
|
|
Cash, cash equivalents, restricted cash and securities at beginning of period
|
587
|
|
|
224
|
|
|
Cash, cash equivalents, restricted cash and securities at end of period
|
$
|
420
|
|
|
6,164
|
|
Supplemental cash flow information:
|
|
|
|
|||
Income taxes refunded (paid), net
|
$
|
674
|
|
|
(378
|
)
|
Interest paid (net of capitalized interest of $42 and $61)
|
$
|
(1,571
|
)
|
|
(917
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||
|
(Dollars in millions except per share amounts)
|
|||||||||||
COMMON STOCK
|
|
|
|
|
|
|
|
|||||
Balance at beginning of period
|
$
|
1,079
|
|
|
550
|
|
|
1,069
|
|
|
547
|
|
Issuance of common stock through dividend reinvestment, incentive and benefit plans
|
2
|
|
|
—
|
|
|
12
|
|
|
3
|
|
|
Balance at end of period
|
1,081
|
|
|
550
|
|
|
1,081
|
|
|
550
|
|
|
ADDITIONAL PAID-IN CAPITAL
|
|
|
|
|
|
|
|
|||||
Balance at beginning of period
|
23,360
|
|
|
14,637
|
|
|
23,314
|
|
|
14,970
|
|
|
Change in common stock through dividend reinvestment, incentive and benefit plans
|
7
|
|
|
2
|
|
|
(2
|
)
|
|
5
|
|
|
Shares withheld to satisfy tax withholdings
|
(15
|
)
|
|
(1
|
)
|
|
(50
|
)
|
|
(16
|
)
|
|
Share-based compensation and other, net
|
48
|
|
|
21
|
|
|
142
|
|
|
59
|
|
|
Dividends declared
|
—
|
|
|
(289
|
)
|
|
—
|
|
|
(648
|
)
|
|
Acquisition of additional minority interest in a subsidiary
|
(1
|
)
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
Balance at end of period
|
23,399
|
|
|
14,370
|
|
|
23,399
|
|
|
14,370
|
|
|
ACCUMULATED OTHER COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|||||
Balance at beginning of period
|
(2,490
|
)
|
|
(2,050
|
)
|
|
(1,995
|
)
|
|
(2,117
|
)
|
|
Cumulative effect of adoption of ASU 2018-02,
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
|
—
|
|
|
—
|
|
|
(407
|
)
|
|
—
|
|
|
Other comprehensive income
|
36
|
|
|
56
|
|
|
(52
|
)
|
|
123
|
|
|
Balance at end of period
|
(2,454
|
)
|
|
(1,994
|
)
|
|
(2,454
|
)
|
|
(1,994
|
)
|
|
RETAINED EARNINGS
|
|
|
|
|
|
|
|
|||||
Balance at beginning of period
|
1,040
|
|
|
(51
|
)
|
|
1,103
|
|
|
(1
|
)
|
|
Net income
|
272
|
|
|
92
|
|
|
679
|
|
|
272
|
|
|
Cumulative effect of adoption of ASU 2018-02,
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
|
—
|
|
|
—
|
|
|
407
|
|
|
—
|
|
|
Cumulative net effect of adoption of ASU 2014-09, Revenue from Contracts with Customers, net of $(17), $—, $(117) and $— tax
|
49
|
|
|
—
|
|
|
346
|
|
|
—
|
|
|
Cumulative effect of adoption of ASU 2016-09,
Improvements to Employee Share-Based Payment Accounting
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
Dividends declared
|
(584
|
)
|
|
(7
|
)
|
|
(1,758
|
)
|
|
(240
|
)
|
|
Balance at end of period
|
777
|
|
|
34
|
|
|
777
|
|
|
34
|
|
|
TOTAL STOCKHOLDERS' EQUITY
|
$
|
22,803
|
|
|
12,960
|
|
|
22,803
|
|
|
12,960
|
|
DIVIDENDS DECLARED PER COMMON SHARE
|
$
|
0.54
|
|
|
0.54
|
|
|
1.62
|
|
|
1.62
|
|
|
Adjusted November 1, 2017
Balance as of
December 31, 2017
|
|
Purchase Price Adjustments
(3)
|
|
Adjusted November 1, 2017
Balance as of
September 30, 2018
|
||||
|
(Dollars in millions)
|
||||||||
Cash, accounts receivable and other current assets
(1)
|
$
|
3,317
|
|
|
(25
|
)
|
|
3,292
|
|
Property, plant and equipment
|
9,311
|
|
|
86
|
|
|
9,397
|
|
|
Identifiable intangible assets
(2)
|
|
|
|
|
|
|
|||
Customer relationships
|
8,964
|
|
|
(476
|
)
|
|
8,488
|
|
|
Other
|
391
|
|
|
(13
|
)
|
|
378
|
|
|
Other noncurrent assets
|
782
|
|
|
203
|
|
|
985
|
|
|
Current liabilities, excluding current maturities of long-term debt
|
(1,461
|
)
|
|
(31
|
)
|
|
(1,492
|
)
|
|
Current maturities of long-term debt
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|
Long-term debt
|
(10,888
|
)
|
|
—
|
|
|
(10,888
|
)
|
|
Deferred revenue and other liabilities
|
(1,629
|
)
|
|
(102
|
)
|
|
(1,731
|
)
|
|
Goodwill
|
10,837
|
|
|
353
|
|
|
11,190
|
|
|
Total estimated aggregate consideration
|
$
|
19,617
|
|
|
(5
|
)
|
|
19,612
|
|
(1)
|
Includes accounts receivable, which had a gross contractual value of
$884 million
on November 1, 2017 and September 30, 2018.
|
(2)
|
The preliminary estimate of the weighted-average amortization period for the acquired intangible assets is approximately
12.0 years
.
|
(3)
|
All purchase price adjustments occurred during the
nine months ended
September 30, 2018
.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||
|
(Dollars in millions)
|
|||||||||||
Transaction-related expenses
|
$
|
1
|
|
|
6
|
|
|
2
|
|
|
23
|
|
Integration-related expenses
|
43
|
|
|
28
|
|
|
275
|
|
|
40
|
|
|
Total acquisition-related expenses
|
$
|
44
|
|
|
34
|
|
|
277
|
|
|
63
|
|
|
Three Months Ended September 30, 2017
|
|
Nine Months Ended September 30, 2017
|
|||
|
(Dollars in millions, except per share amounts)
|
|||||
Operating revenues
|
$
|
6,031
|
|
|
18,316
|
|
Net income
|
194
|
|
|
459
|
|
|
Basic earnings per common share
|
0.18
|
|
|
0.43
|
|
|
Diluted earnings per common share
|
0.18
|
|
|
0.43
|
|
•
|
decreased operating revenues and expenses due to the elimination of transactions among CenturyLink and Level 3 that are now subject to intercompany elimination and the elimination of deferred revenues associated with installation activities that were preliminarily assigned no value at the acquisition date;
|
•
|
increased amortization expense related to identifiable intangible assets, net of decreased depreciation expense to reflect the preliminary fair value of property, plant and equipment;
|
•
|
increased interest expense resulting from (i) interest on the new debt to finance the combination and amortization of the related debt discount and debt issuance costs, (ii) the elimination of Level 3’s historical amortization of debt discount and debt issuance costs and (iii) a reduction in interest expense due to the accretion of an adjustment to reflect the increased preliminary fair value of the long-term debt of Level 3 recognized on the acquisition date; and
|
•
|
the related income tax effects.
|
•
|
the transaction costs incurred by us and Level 3 during the periods presented above (which are further described above in this note);
|
•
|
integration costs incurred by us in future periods; or
|
•
|
potential revenue enhancements, cost synergies or other operating efficiencies that could result from the acquisition
|
|
Dollars in millions
|
||
Goodwill
|
$
|
1,142
|
|
Property, plant and equipment
|
1,051
|
|
|
Other intangible assets
|
249
|
|
|
Other assets
|
66
|
|
|
Less assets recorded as part of the failed-sale-leaseback
|
(526
|
)
|
|
Total net amount of assets derecognized
|
$
|
1,982
|
|
|
|
||
Capital lease obligations
|
$
|
294
|
|
Other liabilities
|
274
|
|
|
Less imputed financing obligations from the failed-sale-leaseback
|
(628
|
)
|
|
Total net imputed liabilities recognized
|
$
|
(60
|
)
|
|
September 30, 2018
|
|
December 31, 2017
|
|||
|
(Dollars in millions)
|
|||||
Goodwill
|
$
|
30,770
|
|
|
30,475
|
|
Customer relationships, less accumulated amortization of $8,153 and $7,096
|
$
|
9,309
|
|
|
10,876
|
|
Indefinite-life intangible assets
|
$
|
269
|
|
|
269
|
|
Other intangible assets subject to amortization:
|
|
|
|
|||
Capitalized software, less accumulated amortization of $2,547 and $2,294
|
1,450
|
|
|
1,469
|
|
|
Trade names and patents, less accumulated amortization of $54 and $31
|
138
|
|
|
159
|
|
|
Total other intangible assets, net
|
$
|
1,857
|
|
|
1,897
|
|
|
Business
|
|
Consumer
|
|
Total
|
||||
|
(Dollars in millions)
|
||||||||
As of December 31, 2017
|
$
|
20,197
|
|
|
10,278
|
|
|
30,475
|
|
Purchase accounting and other adjustments
|
353
|
|
|
—
|
|
|
353
|
|
|
Effect of foreign currency rate change
|
(58
|
)
|
|
—
|
|
|
(58
|
)
|
|
As of September 30, 2018
|
$
|
20,492
|
|
|
10,278
|
|
|
30,770
|
|
•
|
Identification of the contract with a customer;
|
•
|
Identification of the performance obligations in the contract;
|
•
|
Determination of the transaction price;
|
•
|
Allocation of the transaction price to the performance obligations in the contract; and,
|
•
|
Recognition of revenue when, or as, we satisfy a performance obligation.
|
|
Three Months Ended September 30, 2018
|
|||||||||
|
(Dollars in millions, except per share amounts
and shares in thousands)
|
|||||||||
|
Reported Balances as of September 30, 2018
|
|
Impact of ASC 606
|
|
ASC 605
Historical Adjusted Balances
|
|||||
Operating revenues
|
$
|
5,818
|
|
|
(14
|
)
|
|
$
|
5,804
|
|
Cost of services and products (exclusive of depreciation and amortization)
|
2,672
|
|
|
8
|
|
|
2,680
|
|
||
Selling, general and administrative
|
967
|
|
|
16
|
|
|
983
|
|
||
Interest expense
|
557
|
|
|
(7
|
)
|
|
550
|
|
||
Income tax expense
|
57
|
|
|
(8
|
)
|
|
49
|
|
||
Net income
|
$
|
272
|
|
|
(23
|
)
|
|
$
|
249
|
|
|
|
|
|
|
|
|||||
BASIC AND DILUTED EARNINGS PER COMMON SHARE
|
|
|
|
|
|
|||||
BASIC
|
$
|
0.25
|
|
|
(0.02
|
)
|
|
0.23
|
|
|
DILUTED
|
$
|
0.25
|
|
|
(0.02
|
)
|
|
0.23
|
|
|
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|||||
BASIC
|
1,066,904
|
|
|
—
|
|
|
1,066,904
|
|
||
DILUTED
|
1,072,351
|
|
|
—
|
|
|
1,072,351
|
|
|
Nine Months Ended September 30, 2018
|
|||||||||
|
(Dollars in millions, except per share amounts
and shares in thousands)
|
|||||||||
|
Reported Balances as of September 30, 2018
|
|
Impact of ASC 606
|
|
ASC 605
Historical Adjusted Balances
|
|||||
Operating revenues
|
$
|
17,665
|
|
|
12
|
|
|
$
|
17,677
|
|
Cost of services and products (exclusive of depreciation and amortization)
|
8,205
|
|
|
18
|
|
|
8,223
|
|
||
Selling, general and administrative
|
3,191
|
|
|
42
|
|
|
3,233
|
|
||
Interest expense
|
1,638
|
|
|
(7
|
)
|
|
1,631
|
|
||
Income tax expense
|
123
|
|
|
(11
|
)
|
|
112
|
|
||
Net income
|
$
|
679
|
|
|
(30
|
)
|
|
$
|
649
|
|
|
|
|
|
|
|
|||||
BASIC AND DILUTED EARNINGS PER COMMON SHARE
|
|
|
|
|
|
|||||
BASIC
|
$
|
0.64
|
|
|
(0.03
|
)
|
|
0.61
|
|
|
DILUTED
|
$
|
0.63
|
|
|
(0.03
|
)
|
|
0.60
|
|
|
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|||||
BASIC
|
1,065,410
|
|
|
—
|
|
|
1,065,410
|
|
||
DILUTED
|
1,069,726
|
|
|
—
|
|
|
1,069,726
|
|
|
As of September 30, 2018
|
|||||||||
|
(Dollars in millions)
|
|||||||||
|
Reported Balances as of September 30, 2018
|
|
Impact of ASC 606
|
|
ASC 605
Historical Adjusted Balances
|
|||||
Other current assets
|
$
|
1,237
|
|
|
(390
|
)
|
|
$
|
847
|
|
Other long-term assets, net
|
1,014
|
|
|
(93
|
)
|
|
921
|
|
||
Deferred revenue
|
2,547
|
|
|
(101
|
)
|
|
2,446
|
|
||
Deferred income taxes, net
|
2,502
|
|
|
(127
|
)
|
|
2,375
|
|
||
Other long-term liabilities
|
1,075
|
|
|
122
|
|
|
1,197
|
|
||
Retained earnings
|
777
|
|
|
(377
|
)
|
|
400
|
|
|
Three Months Ended September 30, 2018
|
||||||||||
|
(Dollars in millions)
|
||||||||||
|
Total Revenue
|
|
Adjustments for Non-ASC 606 Revenue
(8)
|
|
Total Revenue from Contracts with Customers
|
||||||
Business segment
|
|
|
|
|
|
||||||
IP & Data Services
(1)
|
$
|
1,726
|
|
|
—
|
|
|
$
|
1,726
|
|
|
Transport & Infrastructure
(2)
|
1,331
|
|
|
(71
|
)
|
|
1,260
|
|
|||
Voice & Collaboration
(3)
|
1,075
|
|
|
—
|
|
|
1,075
|
|
|||
IT & Managed Services
(4)
|
153
|
|
|
—
|
|
|
153
|
|
|||
Total business segment revenues
|
4,285
|
|
|
(71
|
)
|
|
4,214
|
|
|||
|
|
|
|
|
|
||||||
Consumer segment
|
|
|
|
|
|
||||||
IP & Data Services
(5)
|
70
|
|
|
(9
|
)
|
|
61
|
|
|||
Transport & Infrastructure
(6)
|
720
|
|
|
(54
|
)
|
|
666
|
|
|||
Voice & Collaboration
(3)
|
565
|
|
|
—
|
|
|
565
|
|
|||
Total consumer segment revenues
|
1,355
|
|
|
(63
|
)
|
|
1,292
|
|
|||
|
|
|
|
|
|
||||||
Non-segment revenues
|
|
|
|
|
|
|
|
|
|||
Regulatory revenues
(7)
|
178
|
|
|
(178
|
)
|
|
—
|
|
|||
Total non-segment revenues
|
178
|
|
|
(178
|
)
|
|
—
|
|
|||
|
|
|
|
|
|
||||||
Total revenues
|
$
|
5,818
|
|
|
$
|
(312
|
)
|
|
$
|
5,506
|
|
|
|
|
|
|
|
||||||
Timing of Revenue
|
|
|
|
|
|
||||||
Goods transferred at a point in time
|
|
|
|
|
$
|
51
|
|
||||
Services performed over time
|
|
|
|
|
5,455
|
|
|||||
Total revenues from contracts with customers
|
|
|
|
|
$
|
5,506
|
|
|
Nine Months Ended September 30, 2018
|
|||||||||
|
(Dollars in millions)
|
|||||||||
|
Total Revenue
|
|
Adjustments for Non-ASC 606 Revenue
(8)
|
|
Total Revenue from Contracts with Customers
|
|||||
Business segment
|
|
|
|
|
|
|||||
IP & Data Services
(1)
|
$
|
5,212
|
|
|
—
|
|
|
$
|
5,212
|
|
Transport & Infrastructure
(2)
|
4,021
|
|
|
(217
|
)
|
|
3,804
|
|
||
Voice & Collaboration
(3)
|
3,324
|
|
|
—
|
|
|
3,324
|
|
||
IT & Managed Services
(4)
|
476
|
|
|
—
|
|
|
476
|
|
||
Total business segment revenues
|
13,033
|
|
|
(217
|
)
|
|
12,816
|
|
||
|
|
|
|
|
|
|||||
Consumer segment
|
|
|
|
|
|
|||||
IP & Data Services
(5)
|
249
|
|
|
(25
|
)
|
|
224
|
|
||
Transport & Infrastructure
(6)
|
2,171
|
|
|
(159
|
)
|
|
2,012
|
|
||
Voice & Collaboration
(3)
|
1,666
|
|
|
—
|
|
|
1,666
|
|
||
Total consumer segment revenues
|
4,086
|
|
|
(184
|
)
|
|
3,902
|
|
||
|
|
|
|
|
|
|||||
Non-segment revenues
|
|
|
|
|
|
|||||
Regulatory revenues
(7)
|
546
|
|
|
(546
|
)
|
|
—
|
|
||
Total non-segment revenues
|
546
|
|
|
(546
|
)
|
|
—
|
|
||
|
|
|
|
|
|
|||||
Total revenues
|
$
|
17,665
|
|
|
(947
|
)
|
|
$
|
16,718
|
|
|
|
|
|
|
|
|||||
Timing of Revenue
|
|
|
|
|
|
|||||
Goods transferred at a point in time
|
|
|
|
|
$
|
132
|
|
|||
Services performed over time
|
|
|
|
|
16,586
|
|
||||
Total revenues from contracts with customers
|
|
|
|
|
$
|
16,718
|
|
(1
|
)
|
Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues.
|
(2
|
)
|
Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues.
|
(3
|
)
|
Includes local, long-distance and other ancillary revenues.
|
(4
|
)
|
Includes IT services and managed services revenues.
|
(5
|
)
|
Includes retail video revenues (including our facilities-based video revenues).
|
(6
|
)
|
Includes primarily broadband and equipment sales and professional services revenues.
|
(7
|
)
|
Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income.
|
(8
|
)
|
Includes regulatory revenues, lease revenues, sublease rental income, revenue from fiber capacity lease arrangements and failed sale leaseback income, which are not within the scope of ASC 606.
|
|
September 30, 2018
|
|
January 1, 2018
|
|||
|
(Dollars in millions)
|
|||||
Customer receivables
(1)
|
$
|
2,436
|
|
|
2,504
|
|
Contract liabilities
|
716
|
|
|
623
|
|
|
Contract assets
|
352
|
|
|
255
|
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2018
|
|||||||||
|
(Dollars in millions)
|
|||||||||||
|
Acquisition Costs
|
|
Fulfillment Costs
|
|
Acquisition Costs
|
|
Fulfillment Costs
|
|||||
Beginning of period balance
|
$
|
286
|
|
|
161
|
|
|
268
|
|
|
133
|
|
Costs incurred
|
53
|
|
|
46
|
|
|
152
|
|
|
105
|
|
|
Amortization
|
(44
|
)
|
|
(34
|
)
|
|
(125
|
)
|
|
(65
|
)
|
|
End of period balance
|
$
|
295
|
|
|
173
|
|
|
295
|
|
|
173
|
|
|
Interest Rates
(1)
|
|
Maturities
|
|
September 30, 2018
|
|
December 31, 2017
|
|||
|
|
|
|
|
(Dollars in millions)
|
|||||
Senior Secured Debt:
|
|
|
|
|
|
|
|
|||
CenturyLink, Inc.
|
|
|
|
|
|
|
|
|||
2017 Revolving Credit Facility
(2)
|
4.898% - 4.908%
|
|
2022
|
|
$
|
590
|
|
|
405
|
|
Term Loan A
|
4.992%
|
|
2022
|
|
1,643
|
|
|
1,575
|
|
|
Term Loan A-1
|
4.992%
|
|
2022
|
|
356
|
|
|
370
|
|
|
Term Loan B
|
4.992%
|
|
2025
|
|
5,955
|
|
|
6,000
|
|
|
Subsidiaries:
|
|
|
|
|
|
|
|
|||
Level 3 Financing, Inc.
|
|
|
|
|
|
|
|
|||
Tranche B 2024 Term Loan
(3)
|
4.432%
|
|
2024
|
|
4,611
|
|
|
4,611
|
|
|
Embarq Corporation subsidiaries
|
|
|
|
|
|
|
|
|||
First mortgage bonds
|
7.125% - 8.370%
|
|
2023 - 2025
|
|
138
|
|
|
151
|
|
|
Senior Notes and Other Debt:
|
|
|
|
|
|
|
|
|||
CenturyLink, Inc.
|
|
|
|
|
|
|
|
|||
Senior notes
|
5.625% - 7.650%
|
|
2019 - 2042
|
|
8,115
|
|
|
8,125
|
|
|
Subsidiaries:
|
|
|
|
|
|
|
|
|||
Level 3 Financing, Inc.
|
|
|
|
|
|
|
|
|||
Senior notes
|
5.125% - 6.125%
|
|
2021 - 2026
|
|
5,315
|
|
|
5,315
|
|
|
Level 3 Parent, LLC
|
|
|
|
|
|
|
|
|||
Senior notes
|
5.125% - 6.1250%
|
|
2022
|
|
600
|
|
|
600
|
|
|
Qwest Corporation
|
|
|
|
|
|
|
|
|||
Senior notes
|
6.125% - 7.750%
|
|
2021 - 2057
|
|
5,955
|
|
|
7,294
|
|
|
Term loan
|
4.250%
|
|
2025
|
|
100
|
|
|
100
|
|
|
Qwest Capital Funding, Inc.
|
|
|
|
|
|
|
|
|||
Senior notes
|
6.500% - 7.750%
|
|
2018 - 2031
|
|
979
|
|
|
981
|
|
|
Embarq Corporation and subsidiary
|
|
|
|
|
|
|
|
|||
Senior note
|
7.995%
|
|
2036
|
|
1,485
|
|
|
1,485
|
|
|
Other
|
9.000%
|
|
2019
|
|
150
|
|
|
150
|
|
|
Capital lease and other obligations
|
Various
|
|
Various
|
|
825
|
|
|
891
|
|
|
Unamortized premiums and other, net
|
|
|
|
|
2
|
|
|
23
|
|
|
Unamortized debt issuance costs
|
|
|
|
|
(292
|
)
|
|
(350
|
)
|
|
Total long-term debt
|
|
|
|
|
36,527
|
|
|
37,726
|
|
|
Less current maturities
|
|
|
|
|
(778
|
)
|
|
(443
|
)
|
|
Long-term debt, excluding current maturities
|
|
|
|
|
$
|
35,749
|
|
|
37,283
|
|
(1)
|
As of
September 30, 2018
.
|
(2)
|
The weighed-average interest rate payable on our outstanding revolving line of credit borrowings at
December 31, 2017
was
4.186%
. The aggregate amount of outstanding revolving line of credit borrowings typically change on a regular basis.
|
(3)
|
The Tranche B 2024 Term Loan is a secured obligation and is guaranteed by Level 3 Parent, LLC and certain other subsidiaries. The Tranche B 2024 Term Loan had an interest rate of
4.432%
as of
September 30, 2018
and
3.557%
as of December 31, 2017. The interest rate on the Tranche B 2024 Term Loan is set with a minimum London Interbank Offered Rate ("LIBOR") of
zero
percent.
|
|
(Dollars in millions)
(1)(2)
|
||
2018 (remaining three months)
|
$
|
241
|
|
2019
|
651
|
|
|
2020
|
1,202
|
|
|
2021
|
3,115
|
|
|
2022
|
5,323
|
|
|
2023 and thereafter
|
25,785
|
|
|
Total long-term debt
|
$
|
36,317
|
|
(1)
|
In Note 3—Sale of Data Centers and Colocation Business, we describe an imputed financing obligation. The amount outstanding on that imputed financing obligation at
September 30, 2018
was
$568 million
. The aggregate maturities of long-term debt do not include
$499 million
of this obligation, which prior to the end of the lease term on April 30, 2020, will be derecognized along with the remaining net book value of the associated real estate assets.
|
(2)
|
Actual principal paid in any year may differ due to the possible future refinancing of outstanding debt or the issuance of new debt. The projected amounts in the table also exclude any impacts from any further acquisitions.
|
|
Severance
|
|
Real Estate
|
|||
|
(Dollars in millions)
|
|||||
Balance at December 31, 2017
|
$
|
33
|
|
|
64
|
|
Accrued to expense
|
126
|
|
|
60
|
|
|
Payments, net
|
(137
|
)
|
|
(16
|
)
|
|
Balance at September 30, 2018
|
$
|
22
|
|
|
108
|
|
|
Pension Plans
|
|||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||
|
(Dollars in millions)
|
|||||||||||
Service cost
|
$
|
17
|
|
|
16
|
|
|
49
|
|
|
47
|
|
Interest cost
|
99
|
|
|
102
|
|
|
296
|
|
|
308
|
|
|
Expected return on plan assets
|
(171
|
)
|
|
(166
|
)
|
|
(513
|
)
|
|
(499
|
)
|
|
Recognition of prior service credit
|
(2
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|
(6
|
)
|
|
Recognition of actuarial loss
|
45
|
|
|
51
|
|
|
135
|
|
|
154
|
|
|
Net periodic pension benefit (income) expense
|
$
|
(12
|
)
|
|
1
|
|
|
(39
|
)
|
|
4
|
|
|
Post-Retirement Benefit Plans
|
|||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||
|
(Dollars in millions)
|
|||||||||||
Service cost
|
$
|
4
|
|
|
4
|
|
|
13
|
|
|
13
|
|
Interest cost
|
24
|
|
|
25
|
|
|
73
|
|
|
75
|
|
|
Expected return on plan assets
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
Recognition of prior service cost
|
5
|
|
|
5
|
|
|
15
|
|
|
15
|
|
|
Net periodic post-retirement benefit expense
|
$
|
32
|
|
|
34
|
|
|
100
|
|
|
102
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||
|
(Dollars in millions, except per share amounts, shares in thousands)
|
|||||||||||
Income (Numerator):
|
|
|
|
|
|
|
|
|||||
Net income
|
$
|
272
|
|
|
92
|
|
|
679
|
|
|
272
|
|
Earnings applicable to non-vested restricted stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net income applicable to common stock for computing basic earnings per common share
|
272
|
|
|
92
|
|
|
679
|
|
|
272
|
|
|
Net income as adjusted for purposes of computing diluted earnings per common share
|
$
|
272
|
|
|
92
|
|
|
679
|
|
|
272
|
|
Shares (Denominator):
|
|
|
|
|
|
|
|
|||||
Weighted-average number of shares:
|
|
|
|
|
|
|
|
|||||
Outstanding during period
|
1,080,589
|
|
|
549,618
|
|
|
1,077,712
|
|
|
548,779
|
|
|
Non-vested restricted stock
|
(13,685
|
)
|
|
(8,097
|
)
|
|
(12,302
|
)
|
|
(7,666
|
)
|
|
Weighted-average shares outstanding for computing basic earnings per common share
|
1,066,904
|
|
|
541,521
|
|
|
1,065,410
|
|
|
541,113
|
|
|
Incremental common shares attributable to dilutive securities:
|
|
|
|
|
|
|
|
|||||
Shares issuable under convertible securities
|
10
|
|
|
10
|
|
|
10
|
|
|
10
|
|
|
Shares issuable under incentive compensation plans
|
5,437
|
|
|
432
|
|
|
4,306
|
|
|
756
|
|
|
Number of shares as adjusted for purposes of computing diluted earnings per common share
|
1,072,351
|
|
|
541,963
|
|
|
1,069,726
|
|
|
541,879
|
|
|
Basic earnings per common share
|
$
|
0.25
|
|
|
0.17
|
|
|
0.64
|
|
|
0.50
|
|
Diluted earnings per common share
|
$
|
0.25
|
|
|
0.17
|
|
|
0.63
|
|
|
0.50
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
|||||||||
|
Input
Level
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|||||
|
|
|
(Dollars in millions)
|
|||||||||||
Liabilities—Long-term debt, excluding capital lease and other obligations
|
2
|
|
$
|
35,702
|
|
|
35,750
|
|
|
36,835
|
|
|
36,402
|
|
•
|
Business Segment.
This segment consists generally of providing products and services to small, medium and enterprise business, wholesale, government and international customers, including other communication providers. Our products and services offered to these customers include our local and long-distance voice, VPN data network, private line (including business data services), Ethernet, information technology, wavelength, broadband, colocation and data center services, managed services, professional and other services provided in connection with selling equipment, network security and various other ancillary services, all of which are described further under "Products and Services Categories"; and
|
•
|
Consumer Segment.
This segment consists generally of providing products and services to residential customers. Our products and services offered to these customers include our broadband, local and long-distance voice, video and other ancillary services.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||
|
(Dollars in millions)
|
|||||||||||
Total reportable segment revenues
|
$
|
5,640
|
|
|
3,845
|
|
|
17,119
|
|
|
11,789
|
|
Total reportable segment expenses
|
2,969
|
|
|
2,197
|
|
|
9,244
|
|
|
6,572
|
|
|
Total reportable segment adjusted EBITDA
|
$
|
2,671
|
|
|
1,648
|
|
|
7,875
|
|
|
5,217
|
|
Total margin percentage
|
47
|
%
|
|
43
|
%
|
|
46
|
%
|
|
44
|
%
|
|
|
|
|
|
|
|
|
|
|||||
Business segment:
|
|
|
|
|
|
|
|
|||||
Revenues
|
$
|
4,285
|
|
|
2,425
|
|
|
13,033
|
|
|
7,485
|
|
Expenses
|
2,446
|
|
|
1,537
|
|
|
7,540
|
|
|
4,641
|
|
|
Adjusted EBITDA
|
$
|
1,839
|
|
|
888
|
|
|
5,493
|
|
|
2,844
|
|
Margin percentage
|
43
|
%
|
|
37
|
%
|
|
42
|
%
|
|
38
|
%
|
|
Consumer segment:
|
|
|
|
|
|
|
|
|||||
Revenues
|
$
|
1,355
|
|
|
1,420
|
|
|
4,086
|
|
|
4,304
|
|
Expenses
|
523
|
|
|
660
|
|
|
1,704
|
|
|
1,931
|
|
|
Adjusted EBITDA
|
$
|
832
|
|
|
760
|
|
|
2,382
|
|
|
2,373
|
|
Margin percentage
|
61
|
%
|
|
54
|
%
|
|
58
|
%
|
|
55
|
%
|
•
|
IP and data services
, which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services, CDN services and Vyvx broadcast services) and other ancillary services;
|
•
|
Transport and infrastructure
, which include broadband, private line (including business data services), data center facilities and services, including cloud, hosting and application management solutions, wavelength, equipment sales and professional services, network security services, dark fiber services and other ancillary services;
|
•
|
Voice and collaboration
, which includes primarily local and long-distance voice, including wholesale voice, and other ancillary service;
|
•
|
IT and managed services
, which include information technology services and managed services, which may be purchased in conjunction with our other network services; and
|
•
|
Regulatory revenues,
which consists of Universal Service Fund ("USF") and Connect America Fund ("CAF") support payments and other operating revenues. We receive federal support payments from both federal and state USF programs and from the federal CAF program. The USF and CAF support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services. We generate other operating revenues from the leasing and subleasing of space in our office buildings, warehouses and other properties and from rental income associated with the failed-sale-leaseback. Because we centrally manage the activities that generate these regulatory revenues, these revenues are not included in our segment revenues.
|
(1)
|
Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues.
|
(2)
|
Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues.
|
(3)
|
Includes local, long-distance and other ancillary revenues.
|
(4)
|
Includes IT services and managed services revenues.
|
(5)
|
Includes retail video revenues (including our facilities-based video revenues).
|
(6)
|
Includes primarily broadband and equipment sales and professional services revenues.
|
(7)
|
Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||
|
(Dollars in millions)
|
|||||||||||
Total reportable segment adjusted EBITDA
|
$
|
2,671
|
|
|
1,648
|
|
|
7,875
|
|
|
5,217
|
|
Regulatory revenues
|
178
|
|
|
189
|
|
|
546
|
|
|
544
|
|
|
Depreciation and amortization
|
(1,285
|
)
|
|
(910
|
)
|
|
(3,858
|
)
|
|
(2,739
|
)
|
|
Other operating expenses
|
(670
|
)
|
|
(440
|
)
|
|
(2,152
|
)
|
|
(1,537
|
)
|
|
Total other expense, net
|
(565
|
)
|
|
(348
|
)
|
|
(1,609
|
)
|
|
(999
|
)
|
|
Income before income tax expense
|
329
|
|
|
139
|
|
|
802
|
|
|
486
|
|
|
Income tax expense
|
57
|
|
|
47
|
|
|
123
|
|
|
214
|
|
|
Net income
|
$
|
272
|
|
|
92
|
|
|
679
|
|
|
272
|
|
|
September 30, 2018
|
|
December 31, 2017
|
|||
|
(Dollars in millions)
|
|||||
Prepaid expenses
|
$
|
379
|
|
|
294
|
|
Income tax receivable
|
79
|
|
|
258
|
|
|
Materials, supplies and inventory
|
131
|
|
|
128
|
|
|
Contract assets
|
359
|
|
|
128
|
|
|
Contract acquisition costs
|
155
|
|
|
—
|
|
|
Other
|
134
|
|
|
133
|
|
|
Total other current assets
|
$
|
1,237
|
|
|
941
|
|
|
September 30, 2018
|
|
December 31, 2017
|
|||
|
(Dollars in millions)
|
|||||
Other current liabilities:
|
|
|
|
|||
Accrued contributions to federal programs
|
$
|
136
|
|
|
74
|
|
Dividends payable
|
51
|
|
|
34
|
|
|
Accrued rents
|
41
|
|
|
14
|
|
|
Accrued rents-telephone poles
|
35
|
|
|
34
|
|
|
Litigation contingencies
|
31
|
|
|
45
|
|
|
Other
|
80
|
|
|
143
|
|
|
Total other current liabilities
|
$
|
374
|
|
|
344
|
|
|
Pension Plans
|
|
Post-Retirement
Benefit Plans |
|
Foreign Currency
Translation Adjustment and Other |
|
Total
|
|||||
|
(Dollars in millions)
|
|||||||||||
Balance at December 31, 2017
|
$
|
(1,731
|
)
|
|
(235
|
)
|
|
(29
|
)
|
|
(1,995
|
)
|
Other comprehensive income before reclassifications
|
—
|
|
|
—
|
|
|
(161
|
)
|
|
(161
|
)
|
|
Amounts reclassified from accumulated other comprehensive income
|
97
|
|
|
12
|
|
|
—
|
|
|
109
|
|
|
Net current-period other comprehensive income
|
97
|
|
|
12
|
|
|
(161
|
)
|
|
(52
|
)
|
|
Cumulative effect of adoption of ASU 2018-02,
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
|
(375
|
)
|
|
(32
|
)
|
|
—
|
|
|
(407
|
)
|
|
Balance at September 30, 2018
|
$
|
(2,009
|
)
|
|
(255
|
)
|
|
(190
|
)
|
|
(2,454
|
)
|
Three Months Ended September 30, 2018
|
|
Decrease (Increase)
in Net Income |
|
Affected Line Item in Consolidated Statement of
Operations |
||
|
|
(Dollars in millions)
|
|
|
||
Amortization of pension & post-retirement plans
(1)
|
|
|
|
|
||
Net actuarial loss
|
|
$
|
45
|
|
|
Other income (expense), net
|
Prior service cost
|
|
3
|
|
|
Other income (expense), net
|
|
Total before tax
|
|
48
|
|
|
|
|
Income tax benefit
|
|
(11
|
)
|
|
Income tax expense
|
|
Net of tax
|
|
$
|
37
|
|
|
|
Nine Months Ended September 30, 2018
|
|
Decrease (Increase)
in Net Income |
|
Affected Line Item in Consolidated Statement of
Operations |
||
|
|
(Dollars in millions)
|
|
|
||
Amortization of pension & post-retirement plans
(1)
|
|
|
|
|
||
Net actuarial loss
|
|
$
|
135
|
|
|
Other income (expense), net
|
Prior service cost
|
|
9
|
|
|
Other income (expense), net
|
|
Total before tax
|
|
144
|
|
|
|
|
Income tax benefit
|
|
(35
|
)
|
|
Income tax expense
|
|
Net of tax
|
|
$
|
109
|
|
|
|
(1)
|
See Note 8—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans.
|
|
Pension Plans
|
|
Post-Retirement
Benefit Plans |
|
Foreign Currency
Translation Adjustment and Other |
|
Total
|
|||||
|
(Dollars in millions)
|
|||||||||||
Balance at December 31, 2016
|
$
|
(1,895
|
)
|
|
(162
|
)
|
|
(60
|
)
|
|
(2,117
|
)
|
Other comprehensive income before reclassifications
|
—
|
|
|
—
|
|
|
20
|
|
|
20
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
93
|
|
|
10
|
|
|
—
|
|
|
103
|
|
|
Net current-period other comprehensive income
|
93
|
|
|
10
|
|
|
20
|
|
|
123
|
|
|
Balance at September 30, 2017
|
$
|
(1,802
|
)
|
|
(152
|
)
|
|
(40
|
)
|
|
(1,994
|
)
|
Three Months Ended September 30, 2017
|
|
Decrease (Increase)
in Net Income |
|
Affected Line Item in Consolidated Statement of
Operations |
||
|
|
(Dollars in millions)
|
|
|
||
Amortization of pension & post-retirement plans
(1)
|
|
|
|
|
||
Net actuarial loss
|
|
$
|
51
|
|
|
Other income (expense), net
|
Prior service cost
|
|
3
|
|
|
Other income (expense), net
|
|
Total before tax
|
|
54
|
|
|
|
|
Income tax benefit
|
|
(16
|
)
|
|
Income tax expense
|
|
Net of tax
|
|
$
|
38
|
|
|
|
(1)
|
See Note 8—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans.
|
Nine Months Ended September 30, 2017
|
|
Decrease (Increase)
in Net Income |
|
Affected Line Item in Consolidated Statement of
Operations |
||
|
|
(Dollars in millions)
|
|
|
||
Amortization of pension & post-retirement plans
(1)
|
|
|
|
|
||
Net actuarial loss
|
|
$
|
154
|
|
|
Other income (expense), net
|
Prior service cost
|
|
9
|
|
|
Other income (expense), net
|
|
Total before tax
|
|
163
|
|
|
|
|
Income tax benefit
|
|
(60
|
)
|
|
Income tax expense
|
|
Net of tax
|
|
$
|
103
|
|
|
|
(1)
|
See Note 8—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans.
|
•
|
Business Segment.
This segment consists generally of providing products and services to small, medium and enterprise business, wholesale and government customers, including other communication providers. Our products and services offered to these customers include our local and long-distance voice, VPN data network, private line (including business data services), Ethernet, information technology, wavelength, broadband, colocation and data center services, managed services, professional and other services provided in connection with selling equipment, network security and various other ancillary services, all of which are described further under "Operating Revenues"; and
|
•
|
Consumer Segment.
This segment consists generally of providing products and services to residential customers. Our products and services offered to these customers include our broadband, local and long-distance voice, video and other ancillary services.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||
|
(Dollars in millions, except per share amounts)
|
|||||||||||
Operating revenues
|
$
|
5,818
|
|
|
4,034
|
|
|
17,665
|
|
|
12,333
|
|
Operating expenses
|
4,924
|
|
|
3,547
|
|
|
15,254
|
|
|
10,848
|
|
|
Operating income
|
894
|
|
|
487
|
|
|
2,411
|
|
|
1,485
|
|
|
Interest expense and other (expense) income, net
|
(565
|
)
|
|
(348
|
)
|
|
(1,609
|
)
|
|
(999
|
)
|
|
Income tax expense
|
57
|
|
|
47
|
|
|
123
|
|
|
214
|
|
|
Net income
|
$
|
272
|
|
|
92
|
|
|
679
|
|
|
272
|
|
Basic earnings per common share
|
$
|
0.25
|
|
|
0.17
|
|
|
0.64
|
|
|
0.50
|
|
Diluted earnings per common share
|
$
|
0.25
|
|
|
0.17
|
|
|
0.63
|
|
|
0.50
|
|
|
As of September 30,
|
|
Increase /
(Decrease)
|
|
% Change
|
||||||
|
2018
|
|
2017
|
|
|||||||
|
(in thousands)
|
|
|
||||||||
Operational metrics:
|
|
|
|
|
|
|
|
||||
Total consumer broadband subscribers
(1)
|
4,843
|
|
|
5,137
|
|
|
(294
|
)
|
|
(6
|
)%
|
Total employees
|
46
|
|
|
40
|
|
|
6
|
|
|
15
|
%
|
(1)
|
Consumer broadband subscribers are customers that purchase broadband connection service through their existing telephone lines, stand-alone telephone lines, or fiber-optic cables. Our methodology for counting our consumer broadband subscribers includes only those lines that we use to provide services to external customers and excludes lines used solely by us and our affiliates. It also excludes unbundled loops and includes stand-alone consumer broadband subscribers. We count lines when we install the service.
|
•
|
promote long-term relationships with our customers through bundling of integrated services;
|
•
|
increase the capacity, speed and usage of our networks;
|
•
|
provide a wide array of diverse services, including enhanced or additional services that may become available in the future due to, among other things, advances in technology or improvements in our infrastructure;
|
•
|
provide our premium services to a higher percentage of our customers;
|
•
|
pursue acquisitions of additional assets if available at attractive prices;
|
•
|
increase prices on our products and services if and when practicable; and
|
•
|
market our products and services to new customers.
|
•
|
IP and data services
, which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services, CDN services and Vyvx broadcast services) and other ancillary services;
|
•
|
Transport and infrastructure
, which include broadband, private line (including business data services), data center facilities and services, including cloud, hosting and application management solutions, wavelength, equipment sales and professional services, network security services, dark fiber services and other ancillary services;
|
•
|
Voice and collaboration
, which includes primarily local and long-distance voice, including wholesale voice, and other ancillary services;
|
•
|
IT and managed services
, which include information technology services and managed services, which may be purchased in conjunction with our other network services; and
|
•
|
Regulatory revenues,
which consist of Universal Service Fund ("USF") and Connect America Fund ("CAF") support payments and other operating revenues. We receive federal support payments from both federal and state USF programs and from the federal CAF program. The USF and CAF support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services. We generate other operating revenues from the leasing and subleasing of space in our office buildings, warehouses and other properties and from rental income associated with the above mentioned failed-sale-leaseback. Because we centrally manage the activities that generate these regulatory revenues, these revenues are not included in our segment revenues.
|
|
Three Months Ended September 30,
|
|
Change
|
|
% Change
|
|||||||
|
2018
|
|
2017
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
IP and data services
(1)
|
$
|
1,796
|
|
|
853
|
|
|
943
|
|
|
111
|
%
|
Transport and infrastructure
(2)
|
2,051
|
|
|
1,432
|
|
|
619
|
|
|
43
|
%
|
|
Voice and collaboration
(3)
|
1,640
|
|
|
1,390
|
|
|
250
|
|
|
18
|
%
|
|
IT and managed services
(4)
|
153
|
|
|
170
|
|
|
(17
|
)
|
|
(10
|
)%
|
|
Regulatory revenues
(5)
|
178
|
|
|
189
|
|
|
(11
|
)
|
|
(6
|
)%
|
|
Total operating revenues
|
$
|
5,818
|
|
|
4,034
|
|
|
1,784
|
|
|
44
|
%
|
|
Nine Months Ended September 30,
|
|
Change
|
|
% Change
|
|||||||
|
2018
|
|
2017
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
IP and data services
(1)
|
$
|
5,461
|
|
|
2,564
|
|
|
2,897
|
|
|
113
|
%
|
Transport and infrastructure
(2)
|
6,192
|
|
|
4,489
|
|
|
1,703
|
|
|
38
|
%
|
|
Voice and collaboration
(3)
|
4,990
|
|
|
4,252
|
|
|
738
|
|
|
17
|
%
|
|
IT and managed services
(4)
|
476
|
|
|
484
|
|
|
(8
|
)
|
|
(2
|
)%
|
|
Regulatory revenues
(5)
|
546
|
|
|
544
|
|
|
2
|
|
|
—
|
%
|
|
Total operating revenues
|
$
|
17,665
|
|
|
12,333
|
|
|
5,332
|
|
|
43
|
%
|
(1)
|
Includes primarily VPN data network, Ethernet, IP, video, retail video revenues (including our facilities-based video revenues) and ancillary revenues.
|
(2)
|
Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength, equipment sales, professional services revenues and ancillary revenues.
|
(3)
|
Includes local, long-distance and other ancillary revenues.
|
(4)
|
Includes IT services and managed services revenues.
|
(5)
|
Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income.
|
|
Three Months Ended September 30,
|
|
Change
|
|
% Change
|
|||||||
|
2018
|
|
2017
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Cost of services and products (exclusive of depreciation and amortization)
|
$
|
2,672
|
|
|
1,927
|
|
|
745
|
|
|
39
|
%
|
Selling, general and administrative
|
967
|
|
|
710
|
|
|
257
|
|
|
36
|
%
|
|
Depreciation and amortization
|
1,285
|
|
|
910
|
|
|
375
|
|
|
41
|
%
|
|
Total operating expenses
|
$
|
4,924
|
|
|
3,547
|
|
|
1,377
|
|
|
39
|
%
|
|
Nine Months Ended September 30,
|
|
Change
|
|
% Change
|
|||||||
|
2018
|
|
2017
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Cost of services and products (exclusive of depreciation and amortization)
|
$
|
8,205
|
|
|
5,705
|
|
|
2,500
|
|
|
44
|
%
|
Selling, general and administrative
|
3,191
|
|
|
2,404
|
|
|
787
|
|
|
33
|
%
|
|
Depreciation and amortization
|
3,858
|
|
|
2,739
|
|
|
1,119
|
|
|
41
|
%
|
|
Total operating expenses
|
$
|
15,254
|
|
|
10,848
|
|
|
4,406
|
|
|
41
|
%
|
|
Three Months Ended September 30,
|
|
Change
|
|
% Change
|
|||||||
|
2018
|
|
2017
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Depreciation
|
$
|
839
|
|
|
641
|
|
|
198
|
|
|
31
|
%
|
Amortization
|
446
|
|
|
269
|
|
|
177
|
|
|
66
|
%
|
|
Total depreciation and amortization
|
$
|
1,285
|
|
|
910
|
|
|
375
|
|
|
41
|
%
|
|
Nine Months Ended September 30,
|
|
Change
|
|
% Change
|
|||||||
|
2018
|
|
2017
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Depreciation
|
$
|
2,522
|
|
|
1,919
|
|
|
603
|
|
|
31
|
%
|
Amortization
|
1,336
|
|
|
820
|
|
|
516
|
|
|
63
|
%
|
|
Total depreciation and amortization
|
$
|
3,858
|
|
|
2,739
|
|
|
1,119
|
|
|
41
|
%
|
|
Three Months Ended September 30,
|
|
Change
|
|
% Change
|
|||||||
|
2018
|
|
2017
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Interest expense
|
$
|
(557
|
)
|
|
(362
|
)
|
|
195
|
|
|
54
|
%
|
Net loss on early retirement of debt
|
(33
|
)
|
|
—
|
|
|
33
|
|
|
nm
|
|
|
Other income, net
|
25
|
|
|
14
|
|
|
11
|
|
|
nm
|
|
|
Total other expense, net
|
$
|
(565
|
)
|
|
(348
|
)
|
|
217
|
|
|
62
|
%
|
Income tax expense
|
$
|
57
|
|
|
47
|
|
|
10
|
|
|
21
|
%
|
|
Nine Months Ended September 30,
|
|
Change
|
|
% Change
|
|||||||
|
2018
|
|
2017
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Interest expense
|
$
|
(1,638
|
)
|
|
(1,000
|
)
|
|
638
|
|
|
64
|
%
|
Net loss on early retirement of debt
|
(34
|
)
|
|
(5
|
)
|
|
29
|
|
|
nm
|
|
|
Other income, net
|
63
|
|
|
6
|
|
|
57
|
|
|
nm
|
|
|
Total other expense, net
|
$
|
(1,609
|
)
|
|
(999
|
)
|
|
610
|
|
|
61
|
%
|
Income tax expense
|
$
|
123
|
|
|
214
|
|
|
(91
|
)
|
|
(43
|
)%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||
|
(Dollars in millions)
|
|||||||||||
Business segment:
|
|
|
|
|
|
|
|
|||||
Revenues
|
$
|
4,285
|
|
|
2,425
|
|
|
13,033
|
|
|
7,485
|
|
Expenses
|
2,446
|
|
|
1,537
|
|
|
7,540
|
|
|
4,641
|
|
|
Adjusted EBITDA
|
$
|
1,839
|
|
|
888
|
|
|
5,493
|
|
|
2,844
|
|
Margin percentage
|
43
|
%
|
|
37
|
%
|
|
42
|
%
|
|
38
|
%
|
|
Consumer segment:
|
|
|
|
|
|
|
|
|||||
Revenues
|
$
|
1,355
|
|
|
1,420
|
|
|
4,086
|
|
|
4,304
|
|
Expenses
|
523
|
|
|
660
|
|
|
1,704
|
|
|
1,931
|
|
|
Adjusted EBITDA
|
$
|
832
|
|
|
760
|
|
|
2,382
|
|
|
2,373
|
|
Margin percentage
|
61
|
%
|
|
54
|
%
|
|
58
|
%
|
|
55
|
%
|
|
Business Segment
|
|||||||||||
|
Three Months Ended September 30,
|
|
Increase /
(Decrease) |
|
%Change
|
|||||||
|
2018
|
|
2017
|
|
||||||||
|
(Dollars in millions)
|
|
|
|||||||||
Segment revenues:
|
|
|
|
|
|
|
|
|||||
IP and data services
(1)
|
$
|
1,726
|
|
|
755
|
|
|
971
|
|
|
129
|
%
|
Transport and infrastructure
(2)
|
1,331
|
|
|
735
|
|
|
596
|
|
|
81
|
%
|
|
Voice and collaboration
(3)
|
1,075
|
|
|
765
|
|
|
310
|
|
|
41
|
%
|
|
IT and managed services
(4)
|
153
|
|
|
170
|
|
|
(17
|
)
|
|
(10
|
)%
|
|
Total segment revenues
|
4,285
|
|
|
2,425
|
|
|
1,860
|
|
|
77
|
%
|
|
|
|
|
|
|
|
|
|
|||||
Segment expenses:
|
|
|
|
|
|
|
|
|||||
Total expenses
|
2,446
|
|
|
1,537
|
|
|
909
|
|
|
59
|
%
|
|
Segment adjusted EBITDA
|
$
|
1,839
|
|
|
888
|
|
|
951
|
|
|
107
|
%
|
Segment margin percentage
|
43
|
%
|
|
37
|
%
|
|
|
|
|
|
|
|
Business Segment
|
|||||||||||
|
Nine Months Ended September 30,
|
|
Increase /
(Decrease) |
|
%Change
|
|||||||
|
2018
|
|
2017
|
|
||||||||
|
(Dollars in millions)
|
|
|
|||||||||
Segment revenues:
|
|
|
|
|
|
|
|
|||||
IP and data services
(1)
|
$
|
5,212
|
|
|
2,256
|
|
|
2,956
|
|
|
131
|
%
|
Transport and infrastructure
(2)
|
4,021
|
|
|
2,426
|
|
|
1,595
|
|
|
66
|
%
|
|
Voice and collaboration
(3)
|
3,324
|
|
|
2,319
|
|
|
1,005
|
|
|
43
|
%
|
|
IT and managed services
(4)
|
476
|
|
|
484
|
|
|
(8
|
)
|
|
(2
|
)%
|
|
Total segment revenues
|
13,033
|
|
|
7,485
|
|
|
5,548
|
|
|
74
|
%
|
|
|
|
|
|
|
|
|
|
|||||
Segment expenses:
|
|
|
|
|
|
|
|
|||||
Total expenses
|
7,540
|
|
|
4,641
|
|
|
2,899
|
|
|
62
|
%
|
|
Segment adjusted EBITDA
|
$
|
5,493
|
|
|
2,844
|
|
|
2,649
|
|
|
93
|
%
|
Segment margin percentage
|
42
|
%
|
|
38
|
%
|
|
|
|
|
|
|
(1)
|
Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues.
|
(2)
|
Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues.
|
(3)
|
Includes local, long-distance and other ancillary revenues.
|
(4)
|
Includes IT services and managed services revenues.
|
|
Business Segment
|
|||||||||||
|
Three Months Ended September 30,
|
|
Increase /
(Decrease) |
|
%Change
|
|||||||
|
2018
|
|
2017
|
|
||||||||
|
(Dollars in millions)
|
|
|
|||||||||
Segment revenues by customer sales channel:
|
|
|
|
|
|
|
|
|||||
Medium and small business
|
$
|
860
|
|
|
764
|
|
|
96
|
|
|
13
|
%
|
Enterprise
|
1,278
|
|
|
718
|
|
|
560
|
|
|
78
|
%
|
|
International and global accounts
|
892
|
|
|
222
|
|
|
670
|
|
|
302
|
%
|
|
Wholesale and indirect
|
1,255
|
|
|
721
|
|
|
534
|
|
|
74
|
%
|
|
Total segment revenues by customer sales channel:
|
$
|
4,285
|
|
|
2,425
|
|
|
1,860
|
|
|
77
|
%
|
|
Business Segment
|
|||||||||||
|
Nine Months Ended September 30,
|
|
Increase /
(Decrease) |
|
%Change
|
|||||||
|
2018
|
|
2017
|
|
||||||||
|
(Dollars in millions)
|
|
|
|||||||||
Segment revenues by customer sales channel:
|
|
|
|
|
|
|
|
|||||
Medium and small business
|
$
|
2,605
|
|
|
2,282
|
|
|
323
|
|
|
14
|
%
|
Enterprise
|
3,888
|
|
|
2,147
|
|
|
1,741
|
|
|
81
|
%
|
|
International and global accounts
|
2,732
|
|
|
849
|
|
|
1,883
|
|
|
222
|
%
|
|
Wholesale and indirect
|
3,808
|
|
|
2,207
|
|
|
1,601
|
|
|
73
|
%
|
|
Total segment revenues by customer sales channel:
|
$
|
13,033
|
|
|
7,485
|
|
|
5,548
|
|
|
74
|
%
|
|
Consumer Segment
|
|||||||||||
|
Three Months Ended September 30,
|
|
Increase /
(Decrease)
|
|
% Change
|
|||||||
|
2018
|
|
2017
|
|
||||||||
|
(Dollars in millions)
|
|
|
|||||||||
Segment revenues:
|
|
|
|
|
|
|
|
|||||
IP and data services
(1)
|
$
|
70
|
|
|
98
|
|
|
(28
|
)
|
|
(29
|
)%
|
Transport and infrastructure
(2)
|
720
|
|
|
697
|
|
|
23
|
|
|
3
|
%
|
|
Voice and collaboration
(3)
|
565
|
|
|
625
|
|
|
(60
|
)
|
|
(10
|
)%
|
|
Total segment revenues
|
1,355
|
|
|
1,420
|
|
|
(65
|
)
|
|
(5
|
)%
|
|
|
|
|
|
|
|
|
|
|||||
Segment expenses:
|
|
|
|
|
|
|
|
|||||
Total expenses
|
523
|
|
|
660
|
|
|
(137
|
)
|
|
(21
|
)%
|
|
Segment adjusted EBITDA
|
$
|
832
|
|
|
760
|
|
|
72
|
|
|
9
|
%
|
Segment margin percentage
|
61
|
%
|
|
54
|
%
|
|
|
|
|
|
|
|
Consumer Segment
|
|||||||||||
|
Nine Months Ended September 30,
|
|
Increase /
(Decrease)
|
|
% Change
|
|||||||
|
2018
|
|
2017
|
|
||||||||
|
(Dollars in millions)
|
|
|
|||||||||
Segment revenues:
|
|
|
|
|
|
|
|
|||||
IP and data services
(1)
|
$
|
249
|
|
|
308
|
|
|
(59
|
)
|
|
(19
|
)%
|
Transport and infrastructure
(2)
|
2,171
|
|
|
2,063
|
|
|
108
|
|
|
5
|
%
|
|
Voice and collaboration
(3)
|
1,666
|
|
|
1,933
|
|
|
(267
|
)
|
|
(14
|
)%
|
|
Total segment revenues
|
4,086
|
|
|
4,304
|
|
|
(218
|
)
|
|
(5
|
)%
|
|
|
|
|
|
|
|
|
|
|||||
Segment expenses:
|
|
|
|
|
|
|
|
|||||
Total expenses
|
1,704
|
|
|
1,931
|
|
|
(227
|
)
|
|
(12
|
)%
|
|
Segment adjusted EBITDA
|
$
|
2,382
|
|
|
2,373
|
|
|
9
|
|
|
—
|
%
|
Segment margin percentage
|
58
|
%
|
|
55
|
%
|
|
|
|
|
|
|
(1
|
)
|
Includes retail video revenues (including our facilities-based video revenues).
|
(2
|
)
|
Includes primarily broadband and equipment sales and professional services revenues.
|
(3
|
)
|
Includes local, long-distance and other ancillary revenues.
|
Borrower
|
|
Moody's Investors Service, Inc.
|
|
Standard & Poor's
|
|
Fitch Ratings
|
CenturyLink, Inc.:
|
|
|
|
|
|
|
Unsecured
|
|
B2
|
|
B+
|
|
BB
|
Secured
|
|
Ba3
|
|
BBB-
|
|
BB+
|
|
|
|
|
|
|
|
Qwest Corporation:
|
|
|
|
|
|
|
Unsecured
|
|
Ba2
|
|
BBB-
|
|
BB+
|
|
|
|
|
|
|
|
Level 3 Parent, LLC:
|
|
|
|
|
|
|
Unsecured
|
|
B1
|
|
B+
|
|
BB-
|
|
|
|
|
|
|
|
Level 3 Financing, Inc.
|
|
|
|
|
|
|
Unsecured
|
|
Ba3
|
|
BB
|
|
BB
|
Secured
|
|
Ba1
|
|
BBB-
|
|
BBB-
|
|
Nine Months Ended September 30,
|
|
Change
|
||||||
|
2018
|
|
2017
|
|
|||||
|
(Dollars in millions)
|
||||||||
Net cash provided by operating activities
|
$
|
5,036
|
|
|
2,700
|
|
|
2,336
|
|
Net cash used in investing activities
|
(2,196
|
)
|
|
(850
|
)
|
|
(1,346
|
)
|
|
Net cash (used in) provided by financing activities
|
(3,007
|
)
|
|
4,090
|
|
|
(7,097
|
)
|
|
Total Number of
Shares Withheld
for Taxes
|
|
Average Price Paid
Per Share
|
|||
Period
|
|
|
|
|||
July 2018
|
783,067
|
|
|
$
|
18.64
|
|
August 2018
|
61,980
|
|
|
20.88
|
|
|
September 2018
|
17,493
|
|
|
19.21
|
|
|
Total
|
862,540
|
|
|
|
Exhibit
Number
|
Description
|
||
31.1*
|
|||
31.2*
|
|||
32*
|
|||
101*
|
Financial statements from the Quarterly Report on Form 10-Q of CenturyLink, Inc. for the period ended September 30, 2018, formatted in XBRL: (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Stockholders' Equity and (vi) the Notes to Consolidated Financial Statements.
|
*
|
Exhibit filed herewith.
|
|
CENTURYLINK, INC.
|
|
|
By:
|
/s/ Eric J. Mortensen
|
|
Eric J. Mortensen
Senior Vice President - Controller
(Principal Accounting Officer)
|
1 Year CenturyLink Chart |
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